Why is it so important to you, the consumer, to have a local title insurance professional conduct your real estate closing?

The old adage that all real estate is local is absolutely correct, no doubt about it. And that adage is no truer than in Pennsylvania. Each county and township has its own criteria to transfer real estate and record transactions.

It’s your choice

When refinancing or purchasing be sure to shop for your title insurance provider and by all means choose a local, independent, licensed provider. Choose someone in or around the county in which you live. Don’t settle on the real estate agent’s “in-house” title agency and don’t let your television, internet, or national lender choose for you (let’s call them “out-of-state” lenders). If you do, most likely, you will have a “mobile” notary or notary signing agent conducting your closing.

By hiring an independent, licensed title insurance agent who is located in your community, you are:

• adding a level of security in the protection of your financial information
• hiring an independent eye who is not affiliated with your lender or real estate agent
• saving money
• supporting business owners who pay taxes and give back to your community
• protecting the sanctity of the public record
• adding a wealth of knowledge and expertise to your transaction

See why out-of-state title agents cost you money and why you pay more for less!

When you file a mortgage application with an out-of-state lender (including the big national banks), the lender typically orders title insurance through an out-of-state title insurance agency located in some place like Nebraska. And in some cases, the lender has an ownership interest in the title agency so it is making money off your loan and your title insurance. That’s why they push so hard for you to use the “in-house” company.

How the real estate closing works

The Nebraska title insurance agent doesn’t have a physical presence in Pennsylvania so how will it handle your real estate settlement? Quite simple – but it is going to cost you! It will find a nearby person who is a Notary Public. This Notary may have a printer in the trunk of his car or on top of his clothes dryer. When he receives the call to show up at your closing, he prints the mortgage documents containing all your personal financial information and shows up at your door. Why your door? Do you think it is because he is making it convenient for you? No, it is because he doesn’t have a local office. And guess what, the only way he is paid is by charging you a settlement fee anywhere from $150 -$350 to come to your home. This is how the Notary gets paid – you pay him – not the title agency that contracted with him. And unlike if you used someone local, the fee is not included in the title insurance premium you are paying. In most cases, he has very limited knowledge and expertise. He is not employed by the title agency.

Save yourself money

How can you save money? You simply select a local provider and attend settlement in their office during normal business hours and not pay a closing fee.

Avoid risk

And don’t forget, the Notary Signing Agents as they are sometimes referred to don’t own a community business, don’t have an office in the Commonwealth of Pennsylvania, and do not have a title insurance license. They are NOT employed by a local business owner or a large title insurance underwriter. They are simply independent contractors. But what they do have is your personal financial information including your Social Security Number, income, and birth date. And without a business office, who else in their home has access to your financial information? And what protocols do they have in place to keep the information safe?

A local title insurance agent

The local title insurance agent is part of your community, who pays local and state taxes, sponsors your child’s little league team, pays your neighbor’s salary, supports your local business, and he or she knows the local rules and regulations. He or she is the independent eye that you want for your real estate transaction. A licensed agent is required to attend continuing education courses. They interact daily with the court house, Recorder of Deeds, and the local real estate industry.

Help yourself and your community. No one can remove your right to choose a title insurance provider. Use a local independent (not affiliated with your lender or real estate agent), licensed title insurance provider who has the knowledge and expertise that will benefit you.

There are three major categories of fees associated with a mortgage refinance transaction:

• Lender Fees
• Title Insurance and Settlement Fee
• Government Charges
  

This article will help you understand Title Insurance and other related fees as they apply in the state of Pennsylvania.

The majority of title insurance charges in Pennsylvania are “filed” or approved by the Pennsylvania Insurance Department. These are broken down in four areas:

• Title Insurance Premium
  
• Endorsements to the Title Insurance Policy
  
• Settlement Related Fees
  
• Other Fees
  

Title Insurance Premium

Sometimes referred to as the “title insurance rate,” in Pennsylvania the premium in a mortgage refinance transaction can fall into one of four distinct filed rate structures. The rate is determined by the type of transaction, the amount of insurance required, and the number of years since the last evidence of title insurance (Typically a Deed for value or mortgage filed by an institutional lender).

Mortgage refinance loans are eligible for the Basic rate or one of three discounted rates. The policy amount is equal to the loan amount. See the table below for a quick summary of rate qualifications. Negatively amortizing and reverse mortgage loans may be subject to increased policy limits as required by the mortgage lender.

Title insurance rate calculators are available to help you determine the appropriate rate for your refinance transaction.

Endorsements to the Title Insurance Policy and Closing Service Letter

Since your lender is requiring title insurance, it also may require additional title insurance coverage provided through endorsements to the policy. The rate for most Endorsements in Pennsylvania is $50 per Endorsement.

Most lenders also require a Closing Service Letter that provides additional protections to the lender. The filed rate for a Closing Service Letter is $75.

Settlement Related Fees

These items are “lightly” regulated or not regulated at all. You should pay careful attention to this category and insist on full disclosure of all charges when requesting a quote.

Settlement related charges include notary, overnight mail, tax and utility certifications, and possibly a fee for conducting settlement.

Notary fees should be charged on a per act basis. They are set by the Commonwealth of Pennsylvania.

Pennsylvania Title Agents are to be reimbursed only for their expenses – courier costs, certifications, and other out of pocket expenses. They are not permitted to mark up these items.

A settlement fee is allowable only in specific circumstances. There is no upper limit set by the state. In many cases this charge is not necessary to conduct your closing and only serves to add to the profit of the title agent. You should request it be waived, or negotiate a substantial discount. One way to avoid this charge is to schedule your settlement at the title agent’s office during business hours. Under those circumstances, the settlement fee is absolutely not allowed.

Other Fees

Occasionally other legitimate charges are required for your closing and allowable by the Insurance Department. You should pay attention to any additional items not described above. Often these are unnecessary or “junk fees” like release tracking.  You should shop for title insurance agents who promise no junk fees.

Your best bet is to compare the rates by requesting written title insurance quotes from at least two different title agents recommended by different sources. This should allow you to verify that you are receiving the best possible rates for your refinance transaction.

Homeowners are saving a lot of money on their property transfers, and it all comes down to three letters: FIP

What is a FIP?

In the City of Philadelphia, in accordance with Bill #070541 amending the Realty Transfer Tax section of the Philadelphia Code, you are considered an FIP (Financially Interdependent Person) if you are “Persons who live together as a single household and who, for at least six months, have agreed to share the common necessities of life and to be responsible for each other’s common welfare.”

FIP status is blind to sexual orientation and familial relationships also may qualify such as aunt, uncle, and nephew. The Amendment refers to “the relationship between or among individuals responsible to one another for the common necessities of life (i.e., food, clothing, shelter, etc).”

The Benefits of FIP Status

How might you benefit? If you and your co-FIP own real estate together and one of you no longer wishes to own the property, the Deed conveying his/her interest to you will not be subject to the City’s portion of the realty transfer tax as it would have been prior to the Amendment. The transfer tax in Philadelphia is 3% and on transfers for nominal consideration, the tax is based upon the Fair Market Value of the property. The tax is prorated in accordance with the percentage of interest being transferred.

This exemption also applies to adding a Financially Interdependent Person to your Deed.

Registered Life Partners are not required to prove their financial interdependence.

What to Expect

Your Deed transfer could be subject to audit by the Department of Revenue. Your status will be verified by your submitting documentation including, but not limited to, copies of statements of joint bank accounts, joint utility bills, and proof that you have equally shared in housing expenses.

To protect against the misuse of this benefit, the immediate subsequent transfer of the property within a certain time frame may cause the Department of Revenue to “look back” and tax the previous exempt transaction.

Important to Note

The Commonwealth of Pennsylvania does not recognize an exemption for property transfers between Financially Interdependent Persons; therefore, the transfer will be subject to the 1% Realty Transfer Tax imposed by the Commonwealth of Pennsylvania. The tax is prorated in accordance with the percentage of interest being conveyed.

As in the past, there is no City or State transfer tax assessed on transactions between husband and wife and parent and child.

Where to Turn

There is no doubt that the FIP exemption will benefit many residents and while the transfer is not complex, certain procedures must be followed including the signing and filing of multiple Affidavits. When your real estate transaction requires title insurance and you believe you might be eligible for the FIP exemption, be sure to select a title insurance professional experienced in these transfers. For Deed transfers not requiring title insurance, contact a real estate attorney.

Visit Phila.gov for Bill No. 070541 for details.

Major snow events equate to major expenses for homeowners living in a community development; and unfortunately, there may not be enough money in the coffer to pay for the salting, de-icing, and snow removal.Special Assessments are not uncommon when major storms hit; therefore, make sure when you are purchasing a property that is a CONDO or a PUD (Homeowners’ Association) that you speak directly with the association manager the day of closing if not at the time of closing (start calling the day before) and get in writing any outstanding dues and in particular, ask when the next meeting is to occurr and if any special assessments have already been voted upon.

Your title insurance professional may be doing this service for you but don’t leave this important task to chance.  Start the dialogue with your real estate agent and the seller if your settlement is pending.

If you have yet to sign the Agreement of Sale, pay particular attention to the clause relating to special assessments.   Discuss with your real estate agent or attorney how to best protect yourself against special assessments not yet voted upon but which are anticipated to cover expenses incurred prior to your ownership.